Sunday, 8 June 2014

China-ASEAN trade up 1.2 pct in Jan.-May

rade between China and the Association of Southeast Asian Nations (ASEAN) grew 1.2 percent year on year to 1.12 trillion yuan (181.75 billion U.S. dollars) in the first five months of this year, Chinese customs data showed on Sunday.
The growth came amid a 2.2-percent decline in China's general trade during the same period in yuan-denominated calculations, according to the data released by the General Administration of Customs.
During the January-May period, Chinese exports to ASEAN expanded 4.1 percent to 621.01 billion yuan, compared with a 2.7 percent drop in the nation's general exports, the data showed.
Meanwhile, imports from the ASEAN went down 2.2 percent to 498.57 billion yuan, with the drop deeper than a 1.6 percent decline in the nation's general imports, the data showed.
Analysts said that economic cooperation between China and the ASEAN has remained stable, even though political and economic instability in some ASEAN countries has brought down bilateral trade growth from a high gear since the first quarter of the year.
But trade has proved resilient despite the ambivalent world economic recovery and growing protectionism. Trade rose 10.9 percent to 444 billion U.S. dollars in 2013, exceeding the 7.6 percent increase in China's total foreign trade.
China is the largest trading partner of ASEAN and ASEAN has emerged as China's third largest partner, a major investment destination and an important tourist destination.
Source: Xinhua

Lion whisper plays football with predators

All 10 militants attacking Pakistan's Karachi airport killed

All 10 militants involved in attacking Pakistan's Karachi airport on Sunday night have been killed, spokesperson Inter Services Public Relations Asim Saeed Bajwa said.
Bajwa tweeted that the area has been cleared and all vital assets of the airport including planes are intact.
Source: Xinhua

Chinese military delegation attends ASEAN regional forum meeting

- A Chinese military delegation attended a two-day conference on security policies of the Association of Southeast Asian Nations (ASEAN) Regional Forum, which ended in Myanmar's capital city of Yangon on Sunday.
The delegation, led by Wang Guanzhong, deputy chief of general staff of the Chinese People's Liberation Army, also hosted a China-ASEAN breakfast meeting and held talks with the heads of delegations from some other countries on the sidelines of the conference.
Representatives sent by the forum's 19 member nations and regional organizations attended the meeting to exchange views on such issues as the regional and international security situation, and the contribution made by armed forces in responding to traditional and non-traditional security challenges.
Source: Xinhua

China to enhance cooperation with Central, Eastern Europe

China will beef up cooperation with countries in Central and Eastern Europe (CEE), according to a ministerial meeting that concluded on Sunday in east China.
China will boost exchanges with the 16 CEE countries in a variety of fields, including human resources, infrastructure and investment, Gao Hucheng, China's Minister of Commerce, said at the meeting that focused on economic and trade promotion in the city of Ningbo, east China's Zhejiang Province.
In a step toward more mutual understanding and higher levels of economic cooperation, Gao said that the country will have more exchanges with the CEE countries in terms of human resources.
"We will also see more tie-up in the construction of infrastructure for railways, ports, highways and electricity," Gao said.
Gao added that both sides will provide more convenience in terms of visas and work permits to increase mutual investments and allow more business exchanges.
Representatives from the CEE countries expressed optimism about China's economic prospect and their willingness to enhance cooperation with China to look for more development opportunities.
The conference, with the theme "Deepen pragmatic cooperation; Achieve mutual development", discusses topics covering trade promotion, mutual investment and cooperation in infrastructure construction.
Source: Xinhua

Asia Markets rise after Chinese trade and Japanese Gdp growth beat estimates

Markets at a Glance

Major Stock Indexes

10:31 PM EDT 6/8/2014
LASTCHANGE% CHG
Source: The WSJ
Japan: Nikkei 22515165.0187.770.58%
Hang Seng23111.66160.660.70%
Shanghai Composite2032.162.200.11%
S&P BSE Sensex25396.46376.951.51%
Australia: S&P/ASX5464.0027.100.50%
UK: FTSE 1006858.2144.720.66%
DJIA16924.2888.170.52%
Asia Dow3240.289.690.30%
Global Dow2601.302.470.10%

Greece: SS songs and antisemitism: the week Golden Dawn turned openly Nazi

By  Helena Smith,The Observer
      It has been a bad week for democracy in Athens. All around this great Greek city, the politics of hate now lurk. On Friday I got a taste of it in the tiny Italian-style cafe I frequent off Syntagma Square.
It arrived in the form of two middle-aged men, both supporters of the neo-fascist Golden Dawn – and, by their own account, the holders of university degrees, well-travelled and well-informed. Over espressos, they began to engage in an animated discussion about all that is wrong with Greece.
The first, a self-described businessman decked out in designer suit, brogues and silk tie, blamed the country's economic collapse on malfeasance, corruption and uncontrolled immigration. "The only way to teach our filthy politicians is to bring in Golden Dawn," he trilled, his eyes locked in a fierce glare. "These gentlemen are patriots, proud Greek nationalists, and they know how to deal with the scum, the foreigners who never pay taxes, who steal our jobs, who have taken over our streets."
Dismissing charges that Golden Dawn is a criminal gang masquerading as a political group, the second – a self-described government employee – said the far right was the best response yet to the great Jewish conspiracy of an interconnected banking system that has come with globalisation. "Let's not forget all the faggots and the Jews, the wankers who control the banks, the foreigners who are behind them, who came in and fucked Greece," he insisted. "The criminals who have governed us, who have robbed us of our future, of our dreams, need a big thwack."
Last Wednesday Greece got that jolt when Nikos Michaloliakos, Golden Dawn's imprisoned leader – who stands accused of murder and assault – made his first public appearance in almost nine months. The politics of hate took over Athens as the 58-year-old was hauled before parliament, ahead of a vote to lift his immunity from prosecution, on further charges of illegal weapons possession.
Emboldened by its recent success in European and local elections – in which the party emerged as the country's third biggest political force, thanks to a softening of image that has attracted ever-growing numbers of the middle class – the extremists drove home the message that they were not only on the rebound but here to stay. And as they ran roughshod through the house of democracy, hurling abuse at other MPs in an unprecedented display of violence and vulgarity, there was no mistaking what Golden Dawn is: a party of neo-Nazi creed determined to overturn the democratic order. For, far from being contrite, the handcuffed Michaloliakos was in unusually aggressive mood, giving Nazi salutes, telling the house speaker to "shut up", and instructing guards to take their hands off him.
Outside, black-shirted Golden Dawn supporters, lined up in military formation in Syntagma Square, gave a hearty rendition of the Nazi Horst Wessel song – albeit with Greek lyrics. All this was a far cry from the party's recent efforts to distance itself from the thuggery and racist rhetoric from which it was born.
"That day democracy felt a bit weak," said Pavlos Tzimas, a political commentator who has watched the party's rise from its fringe group beginnings in the early 1980s. He has watched it grow from marginal group to mainstream party over the past three decades. "After all the revelations [about criminal activity], after all the prosecutions against its MPs, it still has the nerve to act in such a way, in scenes of hate that, frankly, I cannot recall ever being seen inside the parliament," he sighed. "Golden Dawn is not a passing phase, it will not disappear with the end of the crisis, it feels untouchable, it fears nothing, and what we saw this week is its real face. It is not like other extremist parties in Europe. It is a true neo-Nazi force whose aim is to use democracy to destroy democracy."
Last Wednesday Greece got that jolt when Nikos Michaloliakos, Golden Dawn's imprisoned leader – who stands accused of murder and assault – made his first public appearance in almost nine months. The politics of hate took over Athens as the 58-year-old was hauled before parliament, ahead of a vote to lift his immunity from prosecution, on further charges of illegal weapons possession.
Emboldened by its recent success in European and local elections – in which the party emerged as the country's third biggest political force, thanks to a softening of image that has attracted ever-growing numbers of the middle class – the extremists drove home the message that they were not only on the rebound but here to stay. And as they ran roughshod through the house of democracy, hurling abuse at other MPs in an unprecedented display of violence and vulgarity, there was no mistaking what Golden Dawn is: a party of neo-Nazi creed determined to overturn the democratic order. For, far from being contrite, the handcuffed Michaloliakos was in unusually aggressive mood, giving Nazi salutes, telling the house speaker to "shut up", and instructing guards to take their hands off him.
Outside, black-shirted Golden Dawn supporters, lined up in military formation in Syntagma Square, gave a hearty rendition of the Nazi Horst Wessel song – albeit with Greek lyrics. All this was a far cry from the party's recent efforts to distance itself from the thuggery and racist rhetoric from which it was born.
What worries Tzimas most is not just the coarsening of public debate but the "banalisation of violence" that is now stalking Greece. "We seem to be getting used to it, and that frightens me," he said.
In an explosive political climate, where popular rage is at boiling point nearly five years into the country's worst crisis in living memory, the politics of hate so embodied by Golden Dawn is becoming increasingly pervasive. "Who cares if six million Jews were exterminated?" asked the businessman back at the cafe, in a shocking endorsement of that reality. "I don't care if they were turned into soap. What I care about is the salary I have lost, the never-ending taxes I am forced to pay, the criminals who rule this country, the anger I carry inside."
In a global survey released by the Anti-Defamation League last month, Greece at 69% was found to be the most antisemitic country in Europe.
"This is the deeper explanation for the growth of Golden Dawn," says Dimitris Psarras, author of The Black Bible of Golden Dawn, which chronicles the party's meteoric rise. "Greece has deep cultural differences with the rest of Europe. After the second world war, it did not undergo real democratisation because we had civil war [1946-49]. And after that the deep state was never really purged [of extreme rightwing elements]. Even when it was a small group, Golden Dawn had ties to the Greek state."
The party's fielding of two retired generals on its European election ticket was testimony to those ties. With three Golden Dawn MEPs now about to take seats in Brussels, the burning question for many is how to confront the extremists. Following the poll, even France's Front National leader, Marine Le Pen, ruled out relations with them.
The independent MP and prominent novelist Petros Tatsopoulos, himself the focus of much of the fascists' fury in parliament last week, thinks there is no other way but to ban Golden Dawn. "It was a huge, historic mistake on the part of our parliament not to de-legitimise Golden Dawn," said Tatsopoulos, until recently an MP with the radical left. "It should have been banned, not for its Nazi ideology but because it is a paramilitary force … who, if it could, would press ahead with a coup d'état," he told the Observer.
Source: theguardian

Japan Steps Up as Regional Counterweight

       The WSJ reports,"Japan has long struggled to define its position in the world. Its two decade-long economic slump destroyed pretensions of becoming Asia's dominant power, while the rise of China dethroned Japan as the world's second-largest economy and raised the specter of a non-liberal hegemon of Asia. Now Prime Minister Shinzo Abe has embraced the role of regional counterweight to Beijing. 
 A primary plank of his policy is to rekindle Japanese relations with India. Mr. Abe was the main official guest at India's Republic Day in January. Tokyo and New Delhi agreed at that time to conduct bilateral naval exercises, and India has invited Japan to participate in the Malabar maritime exercises alongside the U.S. and Australia.
This revitalized cooperation has been embraced by new Indian Prime Minister Narendra Modi, who seeks to build the countries' growing economic ties. Yet the true impetus is strategic, providing both Japan and India with a powerful partner on China's flank. Each has an interest in freedom of navigation and worries about Chinese designs on parts of its territory.
A second prong is to support Southeast Asian nations embroiled in disputes with China. Tokyo has given 10 patrol vessels to the Philippines to help prevent further Chinese seizure of Philippine territory or interference with administrative control over disputed shoals, and Vietnam will also receive Japanese-made ships as soon as they are built. Mr. Abe visited all 10 countries in the Association of Southeast Asian Nations last year and is pushing greater cooperation among Australia, the U.S. and Japan.
The Japanese leader is also redefining his country's broader security policies. He has unveiled plans to end the longstanding ban on "collective self-defense" so that Japanese military forces can aid friends under attack—and, most importantly, work more closely with the United States. Mr. Abe has stated that the alliance with Washington can be effective only if Japan is able to help defend U.S. ships and military personnel from attack by states like North Korea.
Public opposition to expanded military activities abroad may be Mr. Abe's greatest obstacle to making Japan a "normal nation," meaning one that removes onerous restrictions on using its military, even for peacekeeping purposes.
Mr. Abe has adopted the rhetorical tack of claiming that everything Japan does is to support international law. The implication, of course, is that China is undermining international law and norms of behavior—in contrast, for example, to Indonesia and the Philippines peacefully resolving their maritime border dispute, as Mr. Abe noted at the Shangri-La Dialogue. This variant on "naming and shaming" is designed to start isolating China throughout the region. Beijing often helps Mr. Abe make his case, as when Chinese fighter jets flew dangerously close to Japanese surveillance planes over the Senkaku Islands last week.
But if Japan's economy can grow with its geopolitical ambitions, Asia may have an alternative to Chinese hegemony—provided also that the U.S. stays engaged in the region to prevent Beijing from filling in any vacuum in great-power influence. The risks of antagonizing China are becoming more readily apparent, but Japan's most dynamic leader in a decade has decided that his country will no longer be a bystander to history".

China Exports Strengthen With 7% Climb

       The WSJ report, "China posted solid export gains in May, pointing to improving global demand for the nation's goods and providing a bright spot in the outlook for the world's second largest economy.
But surprisingly weak imports in the same month raised concerns over domestic demand, suggesting that the economy isn't out of the woods after its sluggish growth early this year.
Exports climbed 7% year over year in May, according to official data released on Sunday. These were in line with market expectations of a 7.2% rise and marked a healthy improvement over the 0.9% advance in April and the 2.3% decline year on year in the January-April period.
The improvement in exports probably reflected the end of distortions in comparisons with year-ago data.
Early last year, many exporters used over-invoicing of their exports to bring currency onshore, skirting foreign exchange controls, to take advantage of a then-rising Chinese currency. That practice was reduced—if not eliminated—after authorities warned in May last year they would impose tough penalties on firms found to be falsifying reported data.
Analysts said that a slightly weaker yuan currency—which has shed about 3% against the dollar this year—may also have helped exports in May this year.
The 1.6% drop in imports in May was more worrisome as analysts polled by The Wall Street Journal had been looking for a 6% rise.
"Continued subdued import growth seems to reflect slow growth of demand in China's economy," said Louis Kuijs of Royal Bank of Scotland in a note to clients.
China's economic growth slowed to 7.4% year over year in the first quarter of 2014 after a 7.7% year over year rise in the final quarter of last year.
Beijing has responded to the sluggish performance, trying to boost domestic demand with a series of measures such as speeding up spending on railways and offering tax breaks for smaller businesses in what has been dubbed a "mini-stimulus" package.
More recently Beijing told local governments to accelerate their spending on approved projects--where money has already been allocated—or risk losing those funds. It has also told commercial banks to make funds available for mortgage loans to help the important—but ailing--property sector.
Property prices fell month over month in May for the first time in nearly two years, according to an unofficial data provider. Official figures on new housing starts showed a drop of nearly 25% in area terms over the first four months of the year, the latest period for such data.
Analysts said the mini-stimulus measures may be working, as shown in the improved official manufacturing Purchasing managers index, a gauge of factory activity, for May. They added that imports could start to pick up in the coming months.
Overseas shipments from China improved across a broad front in May with exports to the European Union climbing 13.4% and those to the U.S. rising 6.3%, according to the General Administration of Customs. Exports to Taiwan were up 14.7 % while those to the Association of Southeast Asian Nations climbed 9.1% and those to Japan added 2.2%".
Meanwhile, the improved exports and less-than-robust imports led to a substantially wider trade surplus of $35.9 billion for the month, up from a $18.45 billion surplus in April, and topping economists' forecast of a $23.4 billion surplus".

China’s Resource Imports Ebb, But Signs of Health Remain

       The WSJ reports,"China’s imports of major resources fell in May, though they continued to extend modest on-year gains, signaling that macroeconomic uncertainty and metal-financing probes may have taken the edge off trading appetites.
The data reflect a broader trend of strong exports offset by relatively weaker imports in the world’s second largest economy, which is also in key cases the world’s largest buyer of industrial commodities such as iron ore and copper. Analysts widely expected a step back from near-record levels of commodity purchases posted in April.
Imports of crude oil fell 6.4% from April to 6.37 million barrels a day, though they were up 8.9% from a year ago, data from the General Administration of Customs showed Sunday. Iron ore and copper followed the same tack. Imports of the steelmaking ingredient fell 7.2% from April to 77.4 million metric tons but rose 13% on year. Copper shipments ebbed 15.6% from April but gained 6% from the same month in 2013 to reach 380,000 tons in May.
The government has been closely monitoring the role of copper and iron ore imports for their potential to exacerbate China’s vulnerability to financial instability. An estimated third or more of Chinese metal imports are believed to be used as collateral for loans in China’s vast shadow-banking system, instead of feeding actual demand. Chinese authorities are investigating whether companies used the same copper, aluminum and iron ore held as stock in Qingdao– a relatively small port in China’s Shanghai-centered copper trade–as collateral for multiple loans, people familiar with the matter said. News of the probe lowered Chinese copper prices by 4% last week.
“The on-year decline in imports [calculated by headline import value] is possibly due to the tightening of trade finance policies. The impact of the probe in Qingdao is probably bigger than some had thought and more and more banks are paying more attention to it,” ANZ economist Zhou Hao said.
The government is also stepping up its monitoring of iron ore used for financing purposes, though no actual curbs on imports have so far been put in place. Imports are likely to continue to face pressures in the near future, Mr. Zhou said.
Still, China’s commodity imports generally continue to be robust, showing healthy upward clips from a year earlier. This is likely due to a stabilizing economy and a small raft of economic stimulus the government released earlier this year, encouraging investment in infrastructure and urban-renewal projects.
The on-year rise in crude imports may be the due to the opening of a new refinery in Quanzhou in April, analysts say. China’s demand for crude oil might be supported by demand for gasoline, jet fuel, liquefied petroleum gas and the petrochemical feedstock naphtha, all of which have enjoyed healthy demand this year. However, maintenance at some Chinese refineries may have led to the on-month declines, and refineries might be drawing down stockpiles rather than importing more crude oil, analysts say".

WSJ: Petro Poroshenko Sworn In as Ukraine President

     Excerpts.
 The WSJ reports, "Ukrainian President Petro Poroshenko reached out to residents of Ukraine's restive east on Saturday, promising to end a separatist rebellion in their region that has left hundreds dead and pushed the former Soviet republic to the edge of civil war.
Mr. Poroshenko's ability to carry through with his promise of peace, to salvage Ukraine's economy and push the country toward Europe will determine the success of his presidency for the broad mass of pro-Europe demonstrators who rallied on Kiev's main square to topple Kremlin-friendly President Viktor Yanukovych in late February.
"I don't want war. I don't want revenge. I want peace," Mr. Poroshenko said at Ukraine's parliament, after being sworn in as the country's fifth president. The 48-year-old billionaire, who supported the anti-Yanukovych protests since their start late last year, said he was entering the presidency "to preserve and strengthen the unity of the nation."
The challenge facing Mr. Poroshenko comes amid the worst crisis in Ukraine's independent history, which has pitted the U.S. and Europe against Russia and driven the widest chasm between Washington and Moscow since the Cold War.
It isn't immediately clear how Mr. Poroshenko can stem the violence, however, seeing as he has ruled out talks with separatist officials and has said there aren't competent regional leaders with whom Kiev can negotiate.
Kiev and its Western allies have accused Moscow of fomenting the unrest, a charge the Kremlin has denied. Mr. Poroshenko, whose confectionary firm Roshen saw its candies banned in Russia last year, hinted at the accusation of Russian involvement in his speech.
"On the path to the colossal possibilities that have opened up for the European modernization of Ukraine with the fall of tyranny, has arisen a real war, instigated and carried out on Ukrainian territory," he said. Ukrainians won't be made "slaves of criminality and bureaucracy, the servants of colonial authorities," the new president said. He wore a tie the colors of the Ukrainian flag.
Switching into Russian during his speech, Mr. Poroshenko made a direct plea to residents of the rebel-held areas, calling on all who had taken up weapons to lay down their arms and presenting what he called a plan for peace.
Russia annexed the Black Sea peninsula of Crimea in March in response to the toppling of Mr. Yanukovych, provoking sanctions against Russian officials by the U.S. and the EU. Russian President Vladimir Putin met Mr. Poroshenko briefly Friday at a D-Day remembrance ceremony in Normandy, France. The new Ukrainian president said he told Mr. Putin that Crimea is Ukrainian but said he wanted to cooperate with Russia.
"There can be no compromises on questions of Crimea, our European choice and our structure of government," Mr. Poroshenko said, regarding Russia. "But all other things we should discuss and decide at the negotiating table."
Mr. Poroshenko spent part of his speech going after his predecessor, Mr. Yanukovych, saying the Donetsk native had betrayed his own people, robbed the region of its wealth and had turned to financing separatists from exile in Russia.
"It's precisely him who carries full responsibility for the political and socio-economic situation in the region," Mr. Poroshenko said. "And for the joblessness, for the poverty, for the refugees. And for the killed citizens and the mothers' tears.
During his speech, Mr. Poroshenko pledged to return Ukraine to its natural place in Europe, saying he would sign the economic portion of an integration pact with theEuropean Union as soon as possible.
"The pen is in my hand," he said. He also vowed to fulfill all necessary requirements so Ukrainians can travel to Europe without visas starting in January 2015 and one day become citizens of the EU. To do that, he promised to snuff out corruption.
"We are a people who were separated from our great homeland of Europe," he said. "We are returning. Finally and irrevocably.""

Friday, 6 June 2014

Big risks seen in Putin's idea to beef up Gazprom

- President Vladimir Putin's idea of a massive boost to Gazprom's share capital has taken bankers and the energy industry by surprise, with some fearing it could further strain Russia's sanctions-hit economy and undermine the rouble.

Putin floated the unexpected suggestion on Wednesday, hinting that a recapitalisation of the state gas giant could be funded from Russia's gold and foreign currency reserves. Since then, sources have suggested the money could come from a 'rainy day' fund meant to cover the state pension deficit.

On Friday he elaborated on the idea, saying the state could buy into a possible Gazprom share issue with the reserves, but adding that it was just one of several options.

The Kremlin has declined to give details of the plan, and analysts are questioning not only how it would be implemented, but whether Gazprom actually needs the extra funds at all.

"The Gazprom story is rouble-negative. The use of forex reserves to recapitalise Gazprom will decrease the safety cushion held by the central bank," said Tatiana Orlova, strategist at RBS in London.

Russia's gold and forex reserves, the world's fourth largest, have shrunk by $42 billion since last year to $466.9 billion, mostly due to central bank intervention to curb the rouble's fall since the crisis over Ukraine erupted.

"Reserves are needed to support the rouble. We should not forget about 2008 when oil prices more than halved... I think this is a very tricky path," said Sergei Zhavoronkov of the Moscow-based Gaidar Institute for Economic Policy.


It was against that background that Putin told an energy industry conference that a recapitalisation could help Gazprom pay for the required infrastructure.

Analysts, business and government sources asked by Reuters about the Gazprom idea said a recapitalisation could be carried out via loans from state entities or by government purchases of new shares.

Putin mentioned a possible share issue on Friday.

"If the construction costs roughly $55 billion, maybe more, this is a fail-safe option for investing money," he told journalists when asked about the possible recapitalisation during a visit to France for D-Day commemorations.

But he added: "This is just one of the possible options. There are others."

Under current law, the central bank cannot invest its reserves in equity.

Several sources told Reuters the cash could come from one of Russia's 'rainy day funds' that have amassed windfall oil revenue.

"There is an understanding that either the Reserve Fund or the National Wealth Fund" will be used, said a government source. Both are managed by the Finance Ministry and their foreign currency holdings are part of the central bank's reserves.

But by law, the Reserve Fund can only be used to cover budget deficit or repay national debt - so unless there is a change in legislature, the Wealth Fund seems the more likely option. As of June 1, the fund stood at $87 billion, or 4 percent of Russia's gross domestic product.

The fund, which would have little left if Gazprom received all $55 billion, is essential to finance the Pension Fund deficit, which came to $27 billion last year. The need for state support is expected only to grow as Russia's 143-million population is ageing, and 40 million are pensioners already.


Other analysts, however, pointed to the relative low debt of Gazprom, a company often referred to as Russia's "national heritage", and the lack of apparent obstacles to raise new debt.

Putin suggested this was an option. "There's no doubt that with such a long-term ... contract, Gazprom can easily raise money on the market," he said on Friday.

Furthermore, Russia and China have agreed in principle that Beijing will make a $25 billion pre-payment under their gas deal, according to Alexander Medvedev, chief executive of Gazprom Export, which could be used for new infrastructure.

Putin mentioned this as well, saying that it would "in essence make the project substantially less costly."

"Gazprom could manage without recapitalisation," said Ivan Mazalov, a director at Prosperity Capital Management, a Gazprom shareholder. "There are no grounds for share issue. They have good cash flow and debt is at adequate level."

A banking source told Reuters that Gazprom may do a "small" borrowing operation in Chinese yuan this autumn to test Asian appetite for possible bigger deals.

"It has $20 billion of cash and cash equivalents on its balance sheet, generates $55 billion in operating cash flow and has a 0.9 debt/EBITDA ratio. So the company has enough cash to finance its Eastern programme, we believe," VTB Capital said in a note.

Amid the doubts, confusion and lack of further detail from the government, Merrill Lynch analysts suggested the whole idea may be quietly buried.


Source: Reuters

Downturn in Europe's energy markets sharpest since 2008 crisis

Europe's power, gas and coal markets are in their sharpest downturn since the financial crisis of 2008 and traders say subdued demand and increasing capacity hurt chances of a big rebound any time soon.

The power and coal futures markets are down by around 40 percent since peaking after Japan's Fukushima nuclear meltdown in March 2011 pushed up global energy prices.

Prospects for economic recovery and the closure of unprofitable capacity offer some hope, but analysts say overcapacity continues to weigh on Europe's power market along with weak demand.

"European economic growth should continue to recover in 2014, but the recovery will be uneven and overall electricity consumption growth – if any – looks to be modest," analysts at French Bank Societe Generale said in a research note.

Coal prices have fallen as new supply comes to market from exporters such as Australia, Indonesia, South Africa and Colombia, while demand growth has generally slowed in industrialised and emerging markets.

"Excess supply from producing countries exacerbated by weakened Asian demand have continued to affect current international coal trade price behaviour," Societe Generale said, although it expected prices to pick up next year helped by Chinese and Indian demand.

India's coal demand growth has slowed over the past year as utilities slashed new orders due to weaker industry output and a fall in the rupee currency which made dollar-traded imports more expensive. 

RENEWABLES GROWTH

Another important factor for power, gas and coal price trends is growing renewable energy supply which is being spurred subsidies aimed at making Europe's electricity sector cleaner.

"As renewable energy penetration has got to a more advanced level in the past couple of years, this is having a systematic downward impact on electricity prices, not just daily fluctuations," said Jacopo Moccia of the European Wind Energy Association (EWEA).

Some 23 gigawatts (GW) of wind power capacity was installed across the European Union in 2012/2013, according to the EWEA, which is equivalent to adding more than 20 standard European fossil fuel or nuclear power stations.

Solar power capacity is also expanding, as is coal, with at least half a dozen new coal-fired power stations set to connect to the grid in the next two years. 

GAS IS DIFFERENT

Gas prices are also falling, though they held on for longer, buoyed by unrest in gas-rich North Africa and the Middle East Asian demand for liquefied natural gas (LNG) and, more recently, fears over a Russian supply cut to Ukraine, an important transit route for European Union imports. 
This year the gas futures market has shed almost 15 percent of its value.

A mild winter and spring have helped dent heating demand.

"This price slump is more than a seasonal decline as winter turns to spring. It reflects a North West European gas market that is substantially oversupplied," said consultancy Timera Energy.

"Not only are we back to pre-2000 levels of demand, but we now see no chance of the 500 billion cubic metres (bcm) level being attained even in the case of an extremely cold winter," Societe Generale analysts said.

EU efforts to lower dependence on fossil fuels, especially imported ones, could lower European consumption further towards 2020, they added.

Europe's annual gas demand stands at around 480 bcm, down from a peak of almost 525 bcm in the early 2000s.

Adding to this weakness in the gas market is unusually high supply from Qatar, the world's biggest LNG exporter, which generally ships to Asia.

As in Europe, Asian LNG prices have dropped sharply this year.

"It is not in the Qataris' strategic interest to drive a slump in spot prices in their primary market. So surplus LNG is typically sold into Europe," said Timera Energy.

Source: Reuters

Funds cut bullish gold bets to lowest since mid-January -CFTC

June 6 (Reuters) - Hedge funds and money managers cut their bullish bets in gold futures and options in the week to June 3 to their lowest level since mid-January, according to data from the Commodity Futures Trading Commission on Friday.
The group, also known as managed money, also boosted their net short position in silver for a third week and lowered their net long position in copper to its smallest since early May, the CFTC data showed.
The silver short is the highest in at least a year.

Selected categories from the CFTC weekly Commitment of Traders report:
FUTURES + OPTS Managed Swaps Producer
                       Net     Chg       Net     Chg       Net     Chg                                                                                                                                                                                           
Gold               51,064 -17,329   -66,211   15925   -13,727   2,211
Silver            -10,602  -3,605    11,668    4457   -18,418     545
Copper             16,240  -5,075    46,651    2123   -32,119     344

                     Other         NonReport              Open                                                                                                                                                                                                   
                       Net     Chg       Net     Chg  Interest     Chg                                                                                                                                                                                           
Gold               25,831   1,514     3,042  -2,323   604,437  -5,694
Silver              8,278  -1,123     9,075    -271   203,560   7,974
Copper            -25,785    -318    -4,988   2,925   152,241  -1,740
=====================================================================


FUTURES ONLY      Managed             Swaps          Producer
                       Net     Chg       Net     Chg       Net     Chg                                                                                                                                                                                           
Gold               38,182 -19,387   -49,079  14,662   -14,365     532
Silver             -7,638  -3,412    10,691   4,308   -20,331     282
Copper             16,149  -5,057    46,692   2,122   -31,957     319

                     Other         NonReport              Open                                                                                                                                                                                                   
                       Net     Chg       Net     Chg  Interest     Chg                                                                                                                                                                                           
Gold               20,969   5,147     5,247   -4272   397,695  -1,676
Silver              8,404    -910     8,874    -268   161,062   4,743
Copper            -25,889    -305    -4,995    2921   151,783   3,153
=====================================================================

Wall St Week Ahead-S&P 500 nearing the 2000 summit

Investors have spent several months deciphering the mixed signals from the U.S. economy, and yet the S&P 500 has kept moving higher, slowly but surely, putting it just shy of the 2,000 mark.

With its Friday close, the S&P would need just a 2.5 percent gain to vault the 2K level - something most did not expect during the depths of the Great Recession.

The move has been anything but frantic. The S&P 500 has not made a 1 percent move in a single session in almost two months, and the CBOE Volatility Index <.VIX>, the market's favored gauge of anxiety, fell below 11 on Friday, for its lowest close since 2007.

"That the market is going up in low volatility is good for investor sentiment," said Doug Coté, chief market strategist at Voya Investment Management in New York.

What's unclear is whether the market is starting to become overvalued. The forward P/E ratio of the index is now 15.8 and would rise above 16 if the index hits 2,000 and earnings estimates remain the same. However, Coté said given current low interest rates, that level would still be low.

Still, the economy notably contracted in the first quarter of this year. As always, hope of a takeoff in growth persists among equity managers, boosted on Friday by employment data showing the economy finally recouped all the jobs lost during the Great Recession. It took 77 months to do so, the longest time needed to regain jobs lost in a recession.
"The jobs report was not only strong, but also not too good, so the overheating fear is not there yet," said Jim Paulsen, chief investment officer at Wells Capital Management in Minneapolis.

"It suggests we’re headed up to 2,000 (on the S&P 500) in the next weeks."

As the market has rallied, some, including several members of the Federal Reserve, have expressed concern that investors are ignoring risks. The cost to protect against market declines, measured in the options market, has been steadily falling.

Some would call that complacency, but the lack of actual volatility is keeping option prices subdued. Realized volatility for the S&P in the last 10 days has been a bit more than 4 percent, which theoretically makes the VIX expensive, not cheap.

"A lot of people who hedged their bets by buying volatility, many did it in the 13 and 13.5 area (on the VIX), so they don't feel a need to readjust their hedges," said J.J. Kinahan, chief derivatives officer at TD Ameritrade in Chicago.

The round 2,000 print will scare some, while others will have no option but to buy in as they chase performance. Paulsen is expecting a slide in stocks in the second half of the year.

"But right now people are more concerned about getting in before it goes up more, rather than waiting for a correction," he said.

Source: Reuters

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